ALKA KHANDAKA,JAIPUR vs. INCOME TAX OFFICER WARD 1(2), JAIPUR

3. The appellant craves leave to add, alter, amend, or withdraw any of the above grounds of appeal at the time of hearing.

For the year under consideration the assessee has declared total sales of Rs.80,54,292/- and declared net profit of Rs. 10,03,660/- and filed her ITR as per the provisions of section 44AD of the Act.

While assessment proceeding ld. AO noted that the assessee has maintained bank account with United Bank of India, Jaipur bearing account No. 1666050004145. He also observed that the assessee has made cash deposit of Rs. 44,61,000/- in Bank during the period 9.11.2016 to 30.12.2016. In the assessment proceeding the assessee was asked to furnish the immediate source of cash deposited in that bank account. In the assessee submitted that the source of cash deposit was out of sales proceeds made by the assessee and in response the assessee filed the copy of the cash book maintained by the assessee. Ld. AO examined the written submission and evidences filed by the assessee. While verifying the details so filed by the assessee ld. AO noted certain discrepancies in respect of explanation of sources of cash deposits and other related aspects were noticed. Ld. AO asked the assessee to furnish copy of purchase/sale bills for the period 1.4.2016 to 8.11.2016 along with details.

In response thereto, the assessee has furnished details of purchase / sales page no 2 of this order. After examination of these details, summons u/s 131 were issued to the following concerns at the given addresses on 16.12.2019:- a) Shri Ram Babu Sambharia, Prop. M/s Parijat International b) Shri Puneesh Lodha, Prop. M/s Pragati Gems & Jewels c) Shri Kamlesh Sharma Prop. M/s K S Jewels A summons was issued to M/s Parijat International which was served by the Inspector of ld. AO. The other summons could not be served and returned back by the Inspector of the ld. AO with his remarks. During the assessment proceedings, the statement of Shri Ram Babu Sambharia Prop. M/s Parijat International was recorded on oath on 17.12.2019 wherein he contended that he was serving as a delivery man on some flower shop on monthly salary of Rs. 13,500/- and has never ever dealt in jewellery business. He stated to have never filed ITR. Thus, the only alleged credit purchase also proved bogus. From above statement of Shri Rambabu Sambharia, it is evident that he was not engaged in the any business activities and the proprietorship concerned namely Parijat Enterprises was opened and operated in his name by some other person and he is not aware of the transactions made in this concern. Thus, the purchases shown u/s 133(6) was issued to Commercial tax department, Jaipur for providing details of VAT/Sales tax return for AY 2016-17 and KYC of following concerns: a) Shri Ram Babu Sambharia, Prop. M/s Parijat International b) Shri Puneesh Lodha, Prop. M/s Pragati Gems & Jewels c) Shri Kamlesh Sharma Prop. M/s K S Jewells In the case of M/s Parijat International (TIN No.08574052608), the CTO, Jaipur has submitted that "this firm is closed on 31.3.2013. So it has no assessment after 2013-14. In the case of M/s Pragati Gems & Jewels (TIN No.08152259212), the СТО, Jaipur has submitted only KYC form. He has not submitted any return. In the case of M/s K S Jewels (TIN No.0884212515), the CTO, Jaipur has submitted the following:

"the registration of the firm M/s K S Jewels Tin 08842212515 was cancelled on 1.7.2014. Due to cancellation, the firm was not assessed for the FY 2016-17. Also no VAT return was filed by the dealer for the FY 2016-17 as per the dealer profile report on official web portal."

After examination of details filed, a show cause notice was issued on 18.12.2019 for seeking explanation on 20.12.2019 on the above issues as placed on record. Assessee has filed reply / explanation on 19.12.2019 at portal. The ld. AO noted that the written submission filed by the assessee has been taken into consideration, but the explanation furnished by the assessee has tried to substantiate the cash deposit by way of bogus purchases / sales and mislead the revenue and thereby he rejected the contention of the assessee on the following reasons;

8.1 During the course of assessment proceedings an investigation was carried out by way of issuance of summon u/s 131 and notice 133(6) of the Act. 8.2. During the proceedings, assessee was asked to produce the principal persons or persons related to concerns from whom assessee have made purchases. But assessee has denied to produce them. The summon were issued to these parties. Not only Inspector of this office but also postal department could not serve the summons. Two summons were returned back with the remarks in both cases: "bl irs ij bl uke Is dksbZ ugh jgrk gS] uk gh dksbZ jgk gSA". This also proves that the purchases were made through these concerns are bogus purchases. Further in the case of assessee, where the person from whom purchase was claimed categorically denied the transaction the onus to prove the veracity of transaction lies with assessee but assessee has failed to discharge his primary onus to produce the persons from whom he has purchased the items. Hence, it is established that assessee has not made any purchase from these parties and its just a "Make believe arrangement" to make a veil on unexplained cash deposit made by assessee. 8.3 The explanation submitted that assessee has purchased the stock through valid bills and made payment through RTGS/cheque. The said plea is squarely rejected in view of above investigation made during the course of assessment proceedings. Apart from above, assessee has failed to submit any of the following corroborative evidence for "test of genuineness of purchases" i.e. a) Confirmation account of purchaser b) Copy of bank account of purchaser c) Copy of ITR of purchaser d) Copy of Sales tax return e) Copy of stock register 8.4 Apart from above, assessee has not demanded the cross-examination of Shri Rambabu Samaria whose statements were supplied to the assessee along with show cause notice dated 18.12.2019, which is evident from the remarks in front of Alka Khandaka vs. ITO show cause notice ie. "refer to attachment The assessee's ADCPK0819N_2017_Attachment_100022360763.pdf. objection for not providing the statement of Sh. Rambabu Samaria is squarely rejected. For the sake of natural justice, the same was again provided to the assessee. Again assessee has not demanded for cross examination. In the statement, Shri Rambabu Samaria has categorically admitted that he has not made any sale during the year to the assessee. This tantamount shows that the purchases made during the year is established as "bogus". This fact is also established from the reply of Commercial Tax Department, Jaipur. 8.5 The outcome of investigation leads to conclusion that assessee is trying to substantiate the above fictitious bogus cash sales against the bogus purchases of gold/silver jewellery during the period of demonetization and thereafter deposited the cash in hand(SBN) in the bank account and given the colour of 'SALE". This also proves that assessee is indulged in the "SHAME" transaction after declaration of demonetization in the guise of trading of jewellery. 8.6 Assessee has shown her mostly sales and purchases only in the month of October-2016 and November-2016. It is very surprising that assessee has made her mostly sales only in the Month of October 2016. Thus, the sales shown by the assessee on in a business trend and liable to be unaccepted. 8.7 Assessee has claimed that her business depends of the footfall of the assessee. But the assessee has not filed any documentary and firm evidence which can established the high increase of cash sales and cash deposits made by her in comparison to last year. Thus it was proves that the assessee has shown bogus sale and purchases to substantiate her deposits. Based on the above reasons and considering the provision of section 68 of the Act ld. AO added a sum of Rs. 44,61,000/- in the income of the assessee.

4. Aggrieved from the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A)/NFAC challenging the addition made by the ld. AO who has also dismissed the appeal of the assessee by observing as under :

6. Decision

6.1 I have considered the AO's order and the submissions made by the appellant. The only effective ground of appeal in this case is related to addition of Rs. 44,61,000 /- which was made by invoking the provisions of Section 68 of the Act.

Before going in to the details of the case, it is pertinent to understand the facts, circumstances and ground realities of demonetization period i.e. from 09.11.2016 to 30.12.2016. On the evening of 08.11.2016 at 8.15 p.m., in a surprise announcement, demonetization of old Rs.500/- and Rs. 1000/- notes was announced by the Government of India and the demonetization came into effect from 00.00 hrs of 09.11.2016. All the citizens of the country were given option to deposit old demonetized currency notes of Rs. 500/- and Rs. 1,000/- held by them as on 08.11.2016 by 31.12.2016 in their bank accounts besides nominal amounts of Rs. 2,000 to Rs. 4,500 which could be exchanged from banks or withdrawn from ATMs. During the period 09.11.2016 to 30.12.2016 there was virtually no liquidity in the country. Therefore, all the major business cash transactions in the month of November, 2016 took place only for 8 days from 01.11.2016 to 08.11.2016 in old currency notes of Rs.500/- and Rs 1000/-only.

Demonetization was an unexpected announcement with the purpose of curbing black or parallel economy of the country. Owing to sudden announcement of demonetization, persons who had accumulated their unaccounted income as on 08.11.2016 in the form of cash of old Rs. 500/- and Rs. 1000/- currency notes were left with no option but to deposit their unaccounted income in their bank accounts or stand losing the entire money.

The brief facts of the present case are that the appellant filed her return of income on 07.11.2017 declaring total income of Rs. 12,53,650/- under presumptive taxation u/s 44AD. During the scrutiny assessment proceedings, it was found that the assessee had deposited cash of Rs.44,61,000/- in her United Bank of India account between 09.11.2016 and 30.12.2016. When called upon to explain the source of these deposits, the assessee submitted that the same were out of cash sales and opening cash balance.

In support of her claim, the assessee produced copies of sales bills and cash books. She further claimed that the purchases made were genuine and substantiated through bills and banking transactions. However, on detailed inquiry, it was discovered that one of the major suppliers, namely M/s Parijat International, was non-existent. A statement recorded u/s 131 of the proprietor,

Shri Ram Babu Sambharia, revealed that he had never engaged in any jewellery business and was a mere delivery man working on a salary of Rs. 13,500/- per month. He categorically denied having issued any invoice to the assessee. Moreover, as per the Commercial Tax Department, this entity had ceased operations as far back as 2013. Thus, the only credit purchase claimed by the assessee stands proved as bogus.

The appellant contended that denial by the supplier does not invalidate the transaction as the payment was made through banking channels. However, this argument holds no merit. The burden of proof u/s 68 lies squarely on the assessee to establish not only the identity of the party but also the genuineness and creditworthiness of the transaction. In this case, the assessee has failed on all three counts. The use of banking channels does not, by itself, establish genuineness if the counterparty is found to be fictitious or the transaction lacks commercial substance. Moreover, similar findings of non-genuineness were observed with other suppliers such as M/s Pragati Gems and M/s KS Jewels, whose VAT registrations were cancelled prior to the year under consideration, and no returns were filed during FY 2016-17

With respect to the cash deposits during the demonetization window, the assessee argued that the same were generated through cash sales and were duly recorded in the books of accounts. She asserted that the increase in cash sales, especially in October 2016, was due to festive season demand. However, this contention also does not hold under scrutiny. The AO rightly observed that the cash deposits during the 50-day window of demonetization saw an abnormal spike of over 561% compared to the same period in the preceding year, and a 710% jump in overall annual cash deposits. Similarly, cash sales recorded during October 2016, just days before demonetization, spiked unnaturally to Rs.34.64 lakhs, as against Rs.95,091/- in October 2015, an exponential rise unsupported by any credible evidence or third-party confirmations.

The assessee failed to produce even a single customer invoice with a verified identity. No KYC, PAN, or addresses of customers were submitted to justify the volume and nature of such sales. The claim that all customers were unidentifiable cash buyers goes against commercial prudence, particularly in the sale of high-value gold and diamond jewellery. Furthermore, the argument that sales increased due to Diwali in October 2016 is speculative and unsubstantiated, especially when no matching increase in stock purchases or inventory movement is credibly demonstrated.

It is pertinent to note that while the assessee relies heavily on books of account, these books are rendered unreliable when supported by unverifiable purchases and suspicious timing of sales. The fact that such high-value cash deposits were made immediately after demonetization, and were attributed to sales to unknown customers against bogus purchases, raises serious doubts on the genuineness of the transactions. Moreover, the assessee was unable to explain why such large cash balances were retained for long periods without being deposited in the bank prior to demonetization, if they indeed represented genuine sale proceeds.

The assessee's reliance on various judicial pronouncements is misplaced. The cited rulings are distinguishable on facts and pertain to cases where either the purchases were not doubted or cash deposits were within a reasonable business trend. In the instant case, both the purchases and corresponding sales are under doubt, and there is compelling evidence that the transactions are structured to give a colour of legitimacy to unexplained income.

It is also relevant to mention here that the Hon'ble Supreme Court in the case of Commissioner of Income-Tax vs. Durga Prasad More (214 ITR 801) held that human probability and circumstantial evidence has to be kept in mind to decide the genuineness of the transactions. The Hon'ble court observed that "Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal, Therefore the Courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact finding authority is made conclusive by law."

The Hon'ble ITAT, Delhi, in the case of Hersh Win Chadha Vs DCIT (I.T.A. Nos. 3088 to 3098 & 3107/Del/2005), held that:

"The admissibility of documents, evidence or material differs greatly in income tax proceedings and criminal proceedings respectively. In criminal proceedings, the charge is to be proved by the State against the accused, establishing it beyond doubt, whereas as per the settled proposition of law, the income tax liability in the cases of on suspicious transactions is ascertained on the basis of the record, the surrounding material available circumstances, human conduct and preponderance of probabilities."

The Hon'ble Supreme Court by placing reliance on its own judgment in the case of Durga Prasad More, observed the following in the case of Sumati Dayal vs. Commissioner of Income-Tax 1995 AIR 2109

"As laid down by this Court, apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities."

Quite clearly, in the case of the appellant, the 'apparent' is not the 'real', the apparent wears the mask of legitimacy, while the 'real' is a sham and a farce. According to Oxford English Dictionary, a 'sham' means "a thing that is not what it is purported to be. What is purported to be' in this case is an attempt made by the appellant to explain its unexplained money as cash sales from business because due to the sudden announcement of demonetization it had no option but to deposit the unexplained money into banking system. What is 'real' actually is an elaborate design to mislead the revenue authorities and other arms of the Government, conversion of black money into white, and willful evasion of taxes through deliberate planning and strategy.

And when that is the case, one must not forget the timeless wisdom espoused by the apex court in Mc Dowell & Co. Ltd. Vs The Commercial Tax Officer 1986 AIR 649:

"Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges

In view of above detailed discussion and various legal and factual aspects of the case, it is concluded, that the Assessing Officer was justified in treating the cash deposits of Rs. 44,61,000/- as unexplained under section 68 of the Income Tax Act. The explanation furnished by the appellant as source of cash deposit during demonetization period is a part of afterthought story in an attempt to explain the source of cash deposits during demonetization. It is further pertinent to reiterate that the sudden and unexpected announcement of demonetization caught the appellant unaware and it had no option but to deposit unexplained cash in to bank which now it is trying to pass off as revenue receipts.

Alka Khandaka vs. ITO It is well settled principle that the onus is on the appellant to prove the genuineness of these transactions and once the appellant has failed to discharge this onus it is open for Revenue to arrive at conclusion based on facts and circumstances of the case.

Thus, in view of above discussion an amount of Rs.44,61,000/- remains unexplained, was rightly added by the assessing officer and is accordingly upheld.

6.2 In the result, the appeal, being devoid of merit, is dismissed.”

5. Feeling dissatisfied with the above finding of the ld. CIT(A), the assessee – appellant challenged the finding of the ld. CIT(A) before this tribunal on the ground as reproduced hereinabove. To support the various grounds raised by the assessee ld. AR of the assessee, has filed the written submissions which is reproduced herein below:

The present written submissions are respectfully tendered in support of the Grounds of Appeal challenging the legality of the additions made under section 68 of the Income Tax Act, 1961 in the hands of the assessee That the assessee appellant is an individual and engaged in the business of trading of Gold Ornaments & Jewellery in the names of proprietorship concern Alka Gems and is regularly filing its return. That For the year under consideration, it was is also registered under the provisions of Rajasthan Value Added Tax Act under the composition scheme. That the assessee filed its Return of Income u/s 44AD of the Act on 07.11.2017 and declared total income at Rs 12,53,650. GROUND NO. 1-2 [Addition of Rs 44,61,000/- u/s 68 r.w.s 115BBE]

1. That the assessee had deposited cash of Rs. 44,61,000/- in its bank account out of cash in hand available with it on 10.11.2016 & 11.11.2016, i.e., during the period from 09.11.2016 to 30.12.2016 (Demonetization period). Desired information was uploaded on the portal of the income tax department.

2. That the case of the assessee appellant was selected for regular scrutiny u/s 143(3) of the Act and notices u/s 143(2), 142(1) were issued to the assessee appellant from time to time. That in response to notice issued u/s 142(1), Alka Khandaka vs. ITO assessee appellant filed replies and in support, submitted, Purchase and Sale Bills, VAT Returns, Cash Books, Bank Book, Bank Statements, , Stock Summary, etc. and all other information as desired by the Assessing Officer.

3. That the Assessing Officer with preconceived notions, disregarded the submissions of the assessee on assumption & presumption and passed the impugned assessment order dated 16.12.2019 u/s. 143(3) of the Act and made addition of entire cash deposited by the assessee during the demonetization period of Rs. 44,61,000/- u/s. 68 read with section 115BBE of the Act.

4. That ld. Assessing officer issued the summon u/s 131 of the Act to the one of the seller of the assessee appellant i.e Shri Ram Babu Sambharia prop. of M/s Parijat International from whom the assessee make a purchase of Rs 10,80,450/- . That Shri Ram Babu Sambharia denied the fact of any sale made by him to the assessee appellant during the year under consideration.

5. That on the basis of the statement recorded u/s 131 of the Act, the ld. Assessing officer treated the purchase made by the assessee as bogus irrespective of the facts that the entire payment were made by the assessee through account payee cheque on 21.03.2017 and same was debit in the name of M/s Parijat International.

6. That further the ld. Assessing officer during the assessment proceeding issued the notice u/s 133(6) on 17.12.2019 to the Commercial Tax Department for providing the detail of VAT/Sales Tax Return for AY 2016-17 of the parties from the assessee purchase the goods and on the basis of report submitted by the Commercial Tax Department, the ld. Assessing officer treated the purchase as bogus. That on the contrary the ld. Assessing officer completely ignore the confirmation of the parties, payment made through account payee cheque, purchase bills.

7. That it is pertinent to highlight that NO action whatsoever was undertaken by the VAT department against the assessee appellant and the sales made by the assessee has been accepted. The assessee appellant was registered under the Composition Scheme and filed the annually VAT Return.

8. That the Assessing Officer failed to appreciate and consider that entire cash deposited was duly recorded in the books of accounts and the same was deposited out of cash in hand available with the assessee. Entire cash in hand was duly recorded in the books of accounts; the source of cash was from sales made by the assessee out of stock-in-hand available with the assessee and thus there was no occasion to invoke section 68 of the Act when the same was already declare in the sale made during the year under consideration.

9. That for the sake of convenience we are reproducing the cash flow statement of the year under consideration which were submitted before the ld. Assessing officer:-

10. That the Assessing Officer failed to appreciate and consider that the assessee was having a jewelry business and cash sales is a normal feature; There is no bar in making cash sales. In the impugned assessment order as well, the Assessing Officer has also not highlighted which statutory provision the assessee had not complied with. That it is settled law that suspicion howsoever strong but cannot take place the character of evidence.

11. That Ld. Assessing officer made addition of Rs 44,61,000/- u/s 68 of the Act which was merely cash deposit during the demonetization period and same is by way of sale transaction which supported by the complete sale biils and purchase biils. That once the assessee declares the cash deposit by way of sale then the sales recorded in the books of account of the assessee firm cannot be considered as unexplained.

12. For the afore-said proposition, we wish to refer & rely upon the following binding judicial precedents of Hon’ble Jurisdictional ITAT, Jaipur Bench, Jaipur:

• Hon’ble Jurisdictional ITAT Jaipur Bench in SHREE DURGA JWELLERS v. ACIT [2025 (5) TMI 116] has held: Addition u/s 68 - cash deposited in the bank account - assessee has not discharged the onus of proving the identity, creditworthiness, and genuineness of the transactions relating to the cash deposits during demonetization. HELD THAT:- Assessee prompted cash sales by introducing the sale which has not been taken place. Majority of the sales invoices shows the mobile number or the address. AO has not issued any single letter u/s. 133(6) to the buyer when the assessee stated that on the date of demonetization sales was only for Rs.

Alka Khandaka vs. ITO 26,12,469/-. The period were demonetization announced was of the festival and marriage seasons therefore, when the cash sales is not disputed how the cash sales be disputed without bringing anything contrary on record. The sales is duly recorded in the books and in the records of the state value added tax records. When the cash is duly recorded in the cash book as proceeds of the sale the same again cannot be added as unexplained and that too without reduced that receipt from the turnover as the ld. AO has already taxed the income generated from the sales. Assessee serviced the decision in the case of Smt. Harshila Chordia [2006 (11) TMI 117 - RAJASTHAN HIGH COURT] in which it was held that “Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them”. Thus, the sales recorded in the books of account of the assessee firm cannot be considered as unexplained and thereby we direct the ld. AO to delete that addition as the assessee has duly supported the source of cash deposited immediately on 3rd day of demonstration which was the proceedings of the sale made by the assessee. The bench noted that it was not the cash of the revenue that the assessee has accounted the sales in cash on the date of demonetization but we note that sales invoice no. 540, 541 dated 08.11.2016 was by cheque. Even out of cash deposit of Rs. 70,00,000/- the sale after the demonetization was for Rs. 26,12,469/- which was also supported by the delivery of goods and having details of the items sold to customer. Considering the overall facts and material placed on record we see no reason to sustain the addition and therefore, the same is directed to be deleted. Appeal of the assessee is allowed

Hon’ble Chandigarh Bench in Sandeep Kumar Sanserwal v.ITO [2024 (7) TMI 1127] has held:- The fact that the cash receipts for the month of October have been deposited in the very next month in November cannot be a reason to dispute rather it supports the case of the assessee by satisfying the proximity test and the nexus which the assessee has established between the sales and the deposits, this coupled with the fact that there was epidemic regarding FMD disease and winter season resulting in increase sales in these two months has not been totally discarded by the AO and the ld CIT(A) and the fact that the sales have been duly reported and forms part of VAT filing and VAT assessment shows that sales cannot be disputed.

The decision in case of J.M.J Essential Oil Company [2022 (7) TMI 1017 - HIMACHAL PRADESH HIGH COURT] doesn’t support the case of the Revenue as in that case, there were cash sales only in a particular month and there was Alka Khandaka vs. ITO sufficient material on record to show cash sales were fabricated unlike the present case, where the assessee is regularly undertaking cash sales and there are no material on record to establish the sales so reported are fabricated except suspicion due to high sales vis-à-vis other months and which cannot be a ground to dispute the sales, rather, in the instant case, the assessee has produced the necessary sale vouchers and cash book.

We therefore find that the assessee has made the necessary and timely disclosure regarding the source of cash deposited in the SBN notes during the demonetization period and the nexus has been duly established between the sales and cash deposits and in view of the same, we find that there is no justifiable basis to make addition of Rs 23 lacs which already stand disclosed and reported as part of gross receipts u/s 44AD and accepted by the AO resulting in double addition which clearly can’t be sustained in the eyes of law. In the result, the addition so made is hereby directed to be deleted. Appeal of the assessee is allowed.

• Hon’ble Jurisdictional ITAT Jaipur Bench in Jitendra Kumar Tahilramani v. ITO [2025 (2) TMI 598] has held: Unexplained cash deposits u/s 68 - addition of the amount recorded as sales - HELD THAT:- When the cash sales were duly recorded in the books of account and even part of the sales were already considered and part was not considered only due to the fact that the assessee had deposited cash on demonetization on single day on 13.11.2016. In support of the sales the assessee had submitted all the details as required under law and the AO based on the same details accepted the part of the sales on same set of records. Thus, we see no reason to sustain the addition of the amount recorded as sales i.e., for an amount as “unexplained cash deposits” u/s 68 and thereby direct the AO to delete the same. Ground no. 1 raised by the assessee is allowed.

• Hon’ble Jurisdictional ITAT Jaipur Bench in Dinesh Kumar Soni v. DCIT [2024 (11) TMI 854] has held: Addition u/s 68 - unexplained cash credit - Case of the assessee was selected for scrutiny as the assessee has deposited cash during demonetization period - HELD THAT:- On one hand ld. AO accepted the sales and on the other hand on the same set of evidence placed before him he is not considered the other part of the sales and that too based on the estimation, presumption and assumption he has not placed on record failure on the part of the assessee as when the part of the sale is considered then why the other part is not considered.

Alka Khandaka vs. ITO Addition made by the ld. AO and sustained by the ld. CIT(A) merely based on the presumption and assumption. They did not deal to the fact of the case on the same set of evidence part of the sale is accepted and part of the same were not accepted. Considering that factum we do not find any reason to sustain the addition and therefore, we direct the ld. AO to delete that addition made in the hands of the assessee. Assessee appeal allowed. • Hon’ble Jurisdictional ITAT Jaipur Bench in ITO v. Raj Kumar Nowal [2022 (11) TMI 1334] has held: Addition u/s 68 - cash sales of the assessee unexplained - assessee is an individual and deriving income from business of jewellery - CIT-A deleted the addition - HELD THAT:- The assessee is engaged in the business of Jewellery and gold. The higher cash sales on festival season Karva Chouth, Dhanteras and Diwali is general feature in the trade of the assessee and such sales is also apparent from the cash book submitted during the course of assessment proceedings. It is not the case of the A.O. that the assessee did not have the sufficient stock for making the sales. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. As regard to not providing the name, address and PAN of the customers to whom cash sales was made the assessee explained that the sales were below the prescribed limit so it is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. The assessee further explained that in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee. We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. In fact the AO neither found any concrete and conclusive evidence of back dating of the entries of sale, evidence of bogus sales, evidence of bogus purchases, and non- existing cash balance in the books of account. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstance of the case is not accepted - Appeal of the revenue is dismissed.

13. It is further submitted that provisions of Section 115BBE are applicable only on the income which is taxable under the head Income From Other Sources. Since in this case, the source of cash deposit in bank is income from business thus section 115BBE is not applicable. It is further submitted that the assessee had already offered cash sales as income in trading account then the same cannot be taxed u/s 68 or u/s 69A r.w.s. 115BBE of the Act. PRAYER In view of the above facts, legal submissions, and judicial precedents, the assessee-appellant most respectfully prays that the illegal addition of Rs. Rs 44,61,000/- made by the Assessing Officer u/s. 68 r.w.s. 115BBE of the Act being contrary to settled law and being devoid of merits on facts be directed to be deleted.

6. To support the contention so raised in the written submission reliance was placed on the following evidence / records:

Page Nos S.No Particulars From To 1. 01 16 Copy of Written Submission filed before ld. CIT(A) along with the acknowledgement.

2. Copy of ITR & Computation and Profit and Loss A/c and Balance-sheet. 17 23 Copy of Purchase Bills along with the Confirmation. 24 29 3. 30 34 4. Copy of Bank Statement of the year under consideration.

5. Copy of Sales Bills. 35 68 Copy of Cash Book for the year under consideration. 67 77 6. 78 81 7. Copy of Reply dated 23.11.2019 filed before the ld. Assessing officer along with the Stock Summary.

8. Copy of Reply dated 14.12.2019 filed before the ld. Assessing officer along with 82 86 the VAT Return.

8. Per contra, ld. DR supported the orders of the lower authority and also supported the contention by filling the following written submission;

The brief facts of the case are –

I) The assessee is an individual and as per income tax return she was proprietor of M/s Alka Gema and partner in M/s Raj Ratan Jewellers and Khandaka Sons Jewellers. II) The assessee filed return of income tax declaring taxable income at Rs 12,53,650/- on 07/11/2017. III) The case was selected for CASS and enough opportunity was provided, hence Principal of Natural Justice was duly adhered. IV) The assessee filed income tax return as the provision of section 44AD declaring net sales of Rs 80,54,292/- and profit of Rs 10,03,660/-. V) The main issue examined during the scrutiny proceeding was cash deposit in the bank account during demonetization and verification of unexplained purchases for the period under consideration. VI) The Ld. Assessing Officer made addition u/s 68 r.w.s. 115BBE on account of cash deposit amounting to Rs 44,61,000/-. VII) The Ld. CIT(A) dismissed the plead taken by assessee in toto. VIII) The assessee is in appeal before the Hon’ble ITAT Bench, ‘A’ and has raised various grounds of Appeal. The revenue is taking liberty to submit rejoinder and the argument taken by the AR before the Hon’ble Bench on 23/09/2023 as under: - a. The First ground of Appeal is related with the action of Ld. CIT(A). The same is reproduced as under- i. On the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in confirming the addition of Rs 44,61,000/- made by the assessing officer u/s 68 r.w.s 115BBE of the IT Act, 1961 without properly appreciating the explanation, documents and evidences submitted by the appellant regarding the source of cash deposit.

The revenue humbly submits that the ground raised by the assessee is not correct on the following reasons. i. Opportunity of being heard is provided or not. ii. Case law mentuioned by the assessee are dul respected by the Ld. CIT(A) or not. ‘ iii. Submission made by the assessee are in corporated in the order or not. iv. The Ld. CIT(A) has given decision after considering all the facts, relevant section, submission of the assessee and same has been rebutted or not. v. The judgement of Ld. CIT(A) is supported with judgement of Apex Court or relevant case laws or not. vi. The order of Ld. CIT(A) is self speaking or not.

For answering all the above questions, the written submission of the assessee plays vital importance. The assessee has submitted written submission during the hearing that is on 24/09/2025 running in 8 pages. This written submission is reproduced as under with respect of the Hon’ble ITAT’s Members to consider the same in respect of first ground of Appeal :-

‘The present written submissions are respectfully tendered in support of the Grounds of Appeal challenging the legality of the additions made under section 68 of the Income Tax Act, 1961 in the hands of the assessee That the assessee appellant is an individual and engaged in the business of trading of Gold Ornaments & Jewellery in the names of proprietorship concern Alka Gems and is regularly filing its return. That For the year under consideration, it was is also registered under the provisions of Rajasthan Value Added Tax Act under the composition scheme. That the assessee filed its Return Alka Khandaka vs. ITO of Income u/s 44AD of the Act on 07.11.2017 and declared total income at Rs 12,53,650. GROUND NO. 1-2 [Addition of Rs 44,61,000/- u/s 68 r.w.s 115BBE]

1. That the assessee had deposited cash of Rs. 44,61,000/- in its bank account out of cash in hand available with it on 10.11.2016 & 11.11.2016, i.e., during the period from 09.11.2016 to 30.12.2016 (Demonetization period). Desired information was uploaded on the portal of the income tax department.

2. That the case of the assessee appellant was selected for regular scrutiny u/s 143(3) of the Act and notices u/s 143(2), 142(1) were issued to the assessee appellant from time to time. That in response to notice issued u/s 142(1), assessee appellant filed replies and in support, submitted, Purchase and Sale Bills, VAT Returns, Cash Books, Bank Book, Bank Statements,, Stock Summary, etc. and all other information as desired by the Assessing Officer.

3. That the Assessing Officer with preconceived notions, disregarded the submissions of the assessee on assumption & presumption and passed the impugned assessment order dated 16.12.2019 u/s. 143(3) of the Act and made addition of entire cash deposited by the assessee during the demonetization period of Rs. 44,61,000/- u/s. 68 read with section 115BBE of the Act.

4. That Id. Assessing officer issued the summon u/s 131 of the Act to the one of the seller of the assessee appellant i.e Shri Ram Babu Sambharia prop. of M/s Parijat International from whom the assessee make a purchase of Rs 10,80,450/- . That Shri Ram Babu Sambharia denied the fact of any sale made by him to the assessee appellant during the year under consideration.

5. That on the basis of the statement recorded u/s 131 of the Act, the Id. Assessing officer treated the purchase made by the assessee as bogus irrespective of the facts that the entire payment were made by the assessee through account payee cheque on 21.03.2017 and same was debit in the name of M/s Parijat International.

Alka Khandaka vs. ITO 7. That it is pertinent to highlight that NO action whatsoever was undertaken by 7. That it is pertinent to highlight that NO action whatsoever was undertaken by 7. That it is pertinent to highlight that NO action whatsoever was undertaken by the VAT department against the assessee appellant and the sales mad the VAT department against the assessee appellant and the sales mad the VAT department against the assessee appellant and the sales made by the assessee has been accepted. The assessee appellant was registered under the assessee has been accepted. The assessee appellant was registered under the assessee has been accepted. The assessee appellant was registered under the Composition Scheme and filed the annually VAT Return. Composition Scheme and filed the annually VAT Return.

10. That the Assessing Officer failed to appreciate and consider that the 10. That the Assessing Officer failed to appreciate and consider that the 10. That the Assessing Officer failed to appreciate and consider that the assessee was having a jewelry business and cash sales is a normal feature; assessee was having a jewelry business and cash sales is a normal feature; assessee was having a jewelry business and cash sales is a normal feature; There is no bar in making cash sales. There is no bar in making cash sales. In the impugned assessment order as well, In the impugned assessment order as well, the Assessing Officer has also not highlighted which statutory provision the the Assessing Officer has also not highlighted which statutory provision the the Assessing Officer has also not highlighted which statutory provision the assessee had not complied with. That it is settled law that suspicion howsoever assessee had not complied with. That it is settled law that suspicion howsoever assessee had not complied with. That it is settled law that suspicion howsoever strong but cannot take place the character of evidence. strong but cannot take place the character of evidence.

Alka Khandaka vs. ITO 11. That Ld. Assessing officer made addition of Rs 44,61,000/- u/s 68 of the Act which was merely cash deposit during the demonetization period and same is by way of sale transaction which supported by the complete sale biils and purchase biils. That once the assessee declares the cash deposit by way of sale then the sales recorded in the books of account of the assessee firm cannot be considered as unexplained. 12.For the afore-said proposition, we wish to refer & rely upon the following binding judicial precedents of Hon'ble Jurisdictional ITAT, Jaipur Bench, Jaipur: • Hon'ble Jurisdictional ITAT Jaipur Bench in SHREE DURGA JWELLERS v. ACIT [2025 (5) TMI 116] has held: Addition u/s 68 - cash deposited in the bank account - assessee has not discharged the onus of proving the identity, creditworthiness, and genuineness of the transactions relating to the cash deposits during demonetization. HELD THAT:- Assessee prompted cash sales by introducing the sale which has not been taken place. Majority of the sales invoices shows the mobile number or the address. AO has not issued any single letter u/s. 133(6) to the buyer when the assessee stated that on the date of demonetization sales was only for Rs. 26,12,469/-. The period were demonetization announced was of the festival and marriage seasons therefore, when the cash sales is not disputed how the cash sales be disputed without bringing anything contrary on record. The sales is duly recorded in the books and in the records of the state value added tax records. When the cash is duly recorded in the cash book as proceeds of the sale the same again cannot be added as unexplained and that too without reduced that receipt from the turnover as the Id. AO has already taxed the income generated from the sales. Assessee serviced the decision in the case of Smt. Harshila Chordia (2006 (11) TMI 117- RAJASTHAN HIGH COURT] in which it was held that "Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them". Thus, the sales recorded in the books of account of the assessee firm cannot be considered as unexplained and thereby we direct the Id. AO to delete that addition as the assessee has duly supported the source of cash deposited immediately on 3rd day of demonstration which was the proceedings of the sale made by the assessee. The bench noted that it was not the cash of the revenue that the assessee has accounted the sales in cash on the date of demonetization but we note that sales Alka Khandaka vs. ITO invoice no. 540, 541 dated 08.11.2016 was by cheque. Even out of cash deposit of Rs. 70,00,000/- the sale after the demonetization was for Rs. 26,12,469/- which was also supported by the delivery of goods and having details of the items sold to customer. Considering the overall facts and material placed on record we see no reason to sustain the addition and therefore, the same is directed to be deleted. Appeal of the assessee is allowed Hon'ble Chandigarh Bench in Sandeep Kumar Sanserwal v.ITO [2024 (7) TMI 1127] has held:- The fact that the cash receipts for the month of October have been deposited in the very next month in November cannot be a reason to dispute rather it supports the case of the assessee by satisfying the proximity test and the nexus which the assessee has established between the sales and the deposits, this coupled with the fact that there was epidemic regarding FMD disease and winter season resulting in increase sales in these two months has not been totally discarded by the AO and the Id CIT(A) and the fact that the sales have been duly reported and forms part of VAT filing and VAT assessment shows that sales cannot be disputed. The decision in case of J.M.J Essential Oil Company [2022 (7) TMI 1017 - HIMACHAL PRADESH HIGH COURT) doesn't support the case of the Revenue as in that case, there were cash sales only in a particular month and there was sufficient material on record to show cash sales were fabricated unlike the present case, where the assessee is regularly undertaking cash sales and there are no material on record to establish the sales so reported are fabricated except suspicion due to high sales vis-à-vis other months and which cannot be a ground to dispute the sales, rather, in the instant case, the assessee has produced the necessary sale vouchers and cash book. We therefore find that the assessee has made the necessary and timely disclosure regarding the source of cash deposited in the SBN notes during the demonetization period and the nexus has been duly established between the sales and cash deposits and in view of the same, we find that there is no justifiable basis to make addition of Rs 23 lacs which already stand disclosed and reported as part of gross receipts u/s 44AD and accepted by the AO resulting in double addition which clearly can't be sustained in the eyes of law. In the result, the addition so made is hereby directed to be deleted. Appeal of the assessee is allowed. Hon'ble Jurisdictional ITAT Jaipur Bench in Jitendra Kumar Tahilramani v. ITO (2025 (2) TMI 598] has held:

Alka Khandaka vs. ITO Unexplained cash deposits u/s 68-addition of the amount recorded as sales - HELD THAT:- When the cash sales were duly recorded in the books of account and even part of the sales were already considered and part was not considered only due to the fact that the assessee had deposited cash on demonetization on single day on 13.11.2016. In support of the sales the assessee had submitted all the details as required under law and the AO based on the same details accepted the part of the sales on same set of records. Thus, we see no reason to sustain the addition of the amount recorded as sales i.e., for an amount as "unexplained cash deposits" u/s 68 and thereby direct the AO to delete the same. Ground no. 1 raised by the assessee is allowed. Hon'ble Jurisdictional ITAT Jaipur Bench in Dinesh Kumar Soni v. DCIT [2024 (11) TMI 854] has held: Addition u/s 68 - unexplained cash credit - Case of the assessee was selected for scrutiny as the assessee has deposited cash during demonetization period - HELD THAT:- On one hand Id. AO accepted the sales and on the other hand on the same set of evidence placed before him he is not considered the other part of the sales and that too based on the estimation, presumption and assumption he has not placed on record failure on the part of the assessee as when the part of the sale is considered then why the other part is not considered. Addition made by the Id. AO and sustained by the Id. CIT(A) merely based on the presumption and assumption. They did not deal to the fact of the case on the same set of evidence part of the sale is accepted and part of the same were not accepted. Considering that factum we do not find any reason to sustain the addition and therefore, we direct the Id. AO to delete that addition made in the hands of the assessee. Assessee appeal allowed. Hon'ble Jurisdictional ITAT Jaipur Bench in ITO v. Raj Kumar Nowal (2022 (11) TMI 1334] has held Addition u/s 68-cash sales of the assessee unexplained - assessee is an individual and deriving income from business of jewellery - CIT-A deleted the addition HELD THAT:- The assessee is engaged in the business of Jewellery and gold. The higher cash sales on festival season Karva Chouth, Dhanteras and Diwali is general feature in the trade of the assessee and such sales is also apparent from the cash book submitted during the course of assessment proceedings.

Alka Khandaka vs. ITO It is not the case of the A.O. that the assessee did not have the sufficient stock for making the sales. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. As regard to not providing the name, address and PAN of the customers to whom cash sales was made the assessee explained that the sales were below the prescribed limit so it is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. The assessee further explained that in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee. We agree with the findings of Id. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. In fact the AO neither found any concrete and conclusive evidence of back dating of the entries of sale, evidence of bogus sales, evidence of bogus purchases, and existing cash balance in the books of account. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstance of the case is not accepted - Appeal of the revenue is dismissed non- 13. It is further submitted that provisions of Section 115BBE are applicable only on the income which is taxable under the head Income From Other Sources. Sinza in this use, the source of cash deposit in bank is income. from business thus section 115BBE is not applicable. It is further submitted that the assessee had already offered cash sales as income in trading account then the same cannot be taxed u/s 68 or u/s 69A r.w.s. 115BBE of the Act. PRAYER In view of the above facts, legal submissions, and judicial precedents, the assessee-appellant most respectfully prays that the illegal addition of Rs. Rs 44,61,000/-made by the Assessing Officer u/s. 68 r.w.s. 115BBE of the Act being contrary to settled law and being devoid of merits on facts be directed to be deleted. Humbly submitted,

Conclusion on Ground No. 1

The Revenue respectfully submits that Ground No. 1 is not maintainable. The assessee has not pointed out any specific factual error, perversity, or legal infirmity in the order of the Ld. CIT(A). A vague allegation that the appellate authority did not “properly appreciate” evidence is insufficient in law.

The Hon’ble Supreme Court in CIT v. Calcutta Discount Co. Ltd. (1973) 91 ITR 8 (SC), para 11 held that general and vague grounds of appeal which do not specify the error in the order under challenge are not maintainable. Similarly, in CIT v. Walchand & Co. Pvt. Ltd. (1967)

65. ITR 381 (SC), para 16, the Court observed that unless a finding of fact is shown to be perverse or unsupported by material, it cannot be interfered with.

In the present case, the Ld. CIT(A) has passed a reasoned, self-speaking order after considering the assessee’s submissions, the evidence produced, and the report of the Commercial Tax Department. The assessee has not demonstrated how such findings are contrary to record or in violation of law. As held in CIT v. Durga Prasad More (1971) 82 ITR 540 (SC), para 9, the burden lies upon the assessee to substantiate the explanation with credible evidence; mere assertions cannot dislodge reasoned conclusions.

Accordingly, Ground No. 1 deserves to be dismissed in limine as not maintainable, and the addition of ₹44,61,000/- u/s 68 r.w.s. 115BBE, having been confirmed by the Ld. CIT(A) through a reasoned order, stands rightly sustained.

. Ground No. 2: The assessee has taken the ground No. 2 as under:

That on the facts and circumstances of the case the Ld. Assessing Officer grossly erred in relying of the statement given by Shri Rambabu Samaria and treated the purchase and consequently sale as bogus and made addition of Rs 44,61,000/-. Deposit in the bank account during the demonetization period.

The Revenue respectfully submits as under: - Alka Khandaka vs. ITO The assessee has submitted Paper Book before the Hon’ble Bench dated 23/09/2025 and wherein on Paper Book Index it has been noticed that only 08 particulars have been shown, however, the AR has given certificate that documents from Sr. No. 1 to 9 are before the Ld. CIT(A), however it seems a typographical error which may be taken on record. The revenue submits rejoinder on each particular as under: -

Revenue respectfully submits that these documents are prepared by the assessee and the Ld. Assessing Officer pointed out discrepancy and after considering submission of the Assessee made additions. The assessee prepared profit and loss account and Balance Sheet on the basis of that computation was prepared and taxes were paid and declared all the details in the return of income. Before making comments on these documents Revenue respectfully submits that each and every assessee has not only rights but duty also to declare true profit in the income tax return. It is also important and vital to highlight and income tax return is a self-declared document and every filer verified that at the end of the ITR form. In gist, the verification says that whatever declaration has been made, is to the best of its knowledge and belief and same are correct and complete with an approach that same is in accordance with the provisions of the IT Act in respect of Income Chargeable to Income Tax Act, 1961. The taxing system in India is for benefit of country and to establish equality among the citizen of nation. The Income Tax helps in strong building of nation with aim to transparency in the system. The assessee filed the Income Tax return as per her declared business. Now, what was the responsibility of the assessing office is to Alka Khandaka vs. ITO verify the correctness of income declared. In this case, the following need to be acknowledged: - i) The Ld. Assessing Officer has adduced any evidence on back of assessee. ii) Proper opportunity has not been provided. iii) The onus has not been discarged by the revenue. iv) Any violation of legal justice.

When above questions are answered in negative, the verification made by the assessee is under question. The assessee squarely failed before the 3 Authority i.e. AO, Ld. CIT(A) and Hon’ble ITAT to sustain the claim that she was having only true taxable income which is declared in the Income Tax Return. Under these circustances and facts, the declaration made by the assessee cannot be taken as final evidence and the addition made by the assessing officer are hereby requested to the Hon’ble Bench to consider as final.

3. Copy of purchase bills along with the confirmations (Page No. 24 to 29 of the Paper Book) -

From the perusal of enclosure in the Paper Book, it has been noticed that these bills are from the following concerns- a) Pragati Gems and Jewels b) Parijat International c) K S Jewels

Assessee has stated that it is filing copy of purchase bills of the assessee along with confirmations. The revenue objects the same and it is requested with the Hon’ble Bench to consider as false certificate by the AR on the following reasons. i) The confirmation is having no date ii) The confirmation is also filed by the assessee during the assessment proceedings before the Assessing Officer and the same has been discussed in length from page No. 3 to page No. 17 of the Assessment Order. The Assessment Order has detail that the Ld. Assessing Officer has confronted that � Rambabu Samaria denied to having any transaction with assessee Smt. Alka Khandaka and no bills are issued by him as a proprietor of Parijat International (Q. No. 8 reproduced at page No. 6 of statement recorded by the department during the scrutiny proceedings, in the assessment order). Once when assessee filed confirmation and given detail of Rambabu Samaria to whom bill has been claimed to be taken has denied transaction then the same Alka Khandaka vs. ITO confirmation cannot be produced as evidence before the Hon’ble Bench or before any Appellate Authority or the court. Further, Rambabu Samaria also denied having signature in the bills, stating that these bills are not in his handwriting. Under these evidences, the assessee is still using those documents before an Appellate Authority is an classical example of misrepresentation and concealment of facts. � The Ld. Assessing Officer also issued 133(6) to the commercial tax department for further verification and the same has been confronted to the assessee (Page No. 7 of the Assessment Order). The CTO provided the information that Parijat International was closed on 31/03/2013. � The assessee has submitted another confirmation from Pragati Gems which is not having any signature of Paper Book (Page No 24 of the Paper Book). In the confirmation copy (Page No 27 of the Paper Book) signature are there but without any date and complete name of signatory authority. The assessing officer inspector was deputed to serve 131 to Sh. Puneesh Lodha Prop. M/s Pragati Gems as claimed by the assessee. But the inspector submitted the report that summon could not be served as no one was available at the given address (Page No. 3 of the Assessment Order). The Commercial Tax Officer responded in response to 133(6) that only KYC form was filed in this case and no return has been submitted. � Assessee has submitted copy of bill from K S Jewells and also confirmation. The confirmation doesn’t have any date or date confirming party. The Ld. Assessing Officer has given findings in the case on page No. 8 of the Assessment Order. As per inspector’s report no person is available at the given address. As per CTO report, no return has been filed due to cancellation of registration and same is confronted to the assessee.

Finding by the AO:

Background Return Filed: 07.11.2017 declaring income of ₹12,53,650 u/s 44AD.

Business: Proprietorship concern M/s Alka Gems (trading in jewellery); also partner in Raj Rattan Jewellers and Khandaka Sons Jewellers. Sales Declared: ₹80,54,292 with NP of ₹10,03,660.

Scrutiny Selection: Through CASS.

Cash Deposits During Demonetization

Bank Account: United Bank of India, Jaipur (A/c No. 1666050004145). Deposits: ₹44,61,000 between 09.11.2016 and 30.12.2016.

Assessee’s Claim: Deposits from cash sales to unidentifiable customers; supported by cash book and documents.

Purchases and Verification Details of Purchases: Filed by assessee. Summons u/s 131: Issued to 3 parties – M/s Parijat International (Prop. Ram Babu Sambharia) M/s Pragati Gems & Jewels (Prop. Puneesh Lodha) M/s KS Jewels (Prop. Kamlesh Sharma)

Findings: Ram Babu Sambharia: Deposed he was a delivery man on ₹13,500 salary, never in jewellery business, never filed ITR. Purchases from him proved bogus.

Commercial Tax Dept. reports: Parijat International closed in 2013, no VAT returns after that. Pragati Gems – only KYC available, no returns. KS Jewels – registration cancelled in 2014, no VAT returns for FY 2016–17. Show Cause & Assessee’s Reply

SCN (18.12.2019): Asked to explain cash deposits, abnormal spike in sales, and produce parties with bank/ITR/stock records.

Alka Khandaka vs. ITO AO’s Observation from data: Cash sales up to 08.11.2016: ₹51.82 lakh vs ₹11.20 lakh in 2015. October 2016 sales: ₹34.64 lakh vs ₹0.95 lakh in Oct 2015. Closing cash in hand 31.10.2016: ₹41.69 lakh, but not deposited before demonetization (only ₹4,000 deposited).

Abnormal 710% rise in deposits, 561% rise during demonetization, 374% rise in cash sales.

Assessee’s Defence: Claimed genuine purchases (bills + RTGS payments), festive season spike, business depends on customer footfall, maintained cash for business needs. Requested not to treat deposits as unexplained.

AO’s Findings Bogus Purchases: Parties non-existent; assessee failed to produce them.

No confirmations, bank accounts, ITRs, VAT returns, or stock registers produced.

Summons returned unserved.

Statement of Ram Babu denied any sale; assessee did not demand cross- examination.

Bogus Sales & Deposits: Sales concentrated mainly in Oct–Nov 2016; abnormal spike without evidence. No proof of customer identity or stock movement. AO held assessee tried to camouflage unexplained cash as sales.

Application of Section 68: Cash deposits of ₹44,61,000 treated as unexplained credits.

Taxed under Section 115BBE @ 60%.

Initiated u/s 271AAC on unexplained income.

Assessment Outcome Returned Income: ₹12,53,650 Addition u/s 68: ₹44,61,000 Assessed Income: ₹57,14,650 (taxed u/s 115BBE)

Demand & Penalty: Notices issued u/s 234A/B/C/D and 271AAC.

Finding by the Ld. CIT(A):

It is respectfully submitted that the order of the Ld. CIT(A) is well-reasoned and does not call for any interference. The key findings are summarized as under:

Bogus Purchases Established

The assessee relied upon alleged purchases from M/s Parijat International. However, summons u/s 131 revealed that the supposed proprietor was a delivery boy on salary of ₹13,500 and had never engaged in jewellery business. The Commercial Tax Department also confirmed that the VAT registration of this concern was closed in 2013.

Similarly, other suppliers (Pragati Gems & Jewels and KS Jewels) had their VAT registrations cancelled prior to FY 2016–17 and filed no returns.

Thus, the purchases were proved bogus. Banking channel payments alone cannot establish genuineness when the counter-parties are non-existent. The assessee failed on all three tests under Section 68 — identity, genuineness, creditworthiness.

Cash Sales During Demonetization Not Proved The assessee claimed that deposits of ₹44,61,000 represented cash sales. However, the AO and CIT(A) recorded that:

There was a 561% rise in demonetization-period deposits, and 710% rise in annual deposits compared to the previous year.

No credible evidence like KYC, PAN, or customer details was produced, despite the high-value jewellery sales.

Stock movement and purchases did not support such abnormal sales.

The so-called sales were therefore only a colourable device to accommodate unexplained cash.

Double Taxation Argument Misplaced

The assessee relied on various judicial pronouncements where sales were accepted as genuine. These are distinguishable because in those cases, purchases were not in dispute and books of account were not rendered unreliable.

In the present case, both purchases and sales were unverifiable. Once the base itself is tainted, the claim of double taxation cannot survive.

Application of Human Probability

As held by the Hon’ble Supreme Court in Durga Prasad More (82 ITR 540) and Sumati Dayal (214 ITR 801), taxing authorities are entitled to look beyond the apparent and test transactions against the yardstick of human probability.

It is not probable that jewellery worth lakhs would be sold entirely in cash to anonymous buyers without identity proof, especially during demonetization.

The conduct of the assessee shows that the so-called “sales” were only a façade to introduce unaccounted cash.

Colourable Device

Following the principle in McDowell & Co. Ltd. (154 ITR 148, SC), colourable devices cannot form part of legitimate tax planning. The attempt of the assessee to give colour of genuineness to unexplained money by routing it through fabricated purchases and fictitious cash sales is a clear subterfuge. Conclusion Alka Khandaka vs. ITO In light of the above, the addition of ₹44,61,000 made by the AO u/s 68 and confirmed by the CIT(A) is fully justified. The assessee has failed to discharge the onus cast upon her. The findings of the CIT(A) are based on cogent facts, investigation, and settled judicial principles, and deserve to be upheld.

Submission of Assessee before ITAT

The assessee submitted that the assessee has not made any new submission other than what submitted before the Ld. CIT(A) and same has been discussed supra.

Documents submitted before the Assessing Officer and Ld. CIT(A):

The assessee has submitted same documents before the Ld. CIT(A) and Hon’ble Bench and the Revenue has submitted rejoinder supra. Prayer The appeal of the assessee may kindly be dismissed. Respectfully Submitted on Behalf of the Revenue The ld. DR also submitted that in the case the purchase are doubted and therefore, how she has executed the sales and thereby the cash so deposited by the assessee as alleged to have been received on sales is nothing but assessee’s unaccounted income. Based on the analysis placed on record about the bill date for purchase and sale made by the assessee she heavily relied upon the finding so recorded in the order of the ld. AO and as rightly observed by the ld. CIT(A) that the explanation so furnished by the assessee are nothing but afterthought. has not doubted the value added records and when the purchases are doubted the addition canbe made in that section 69C and not under section 68 of the Act and to tax the sales proceeds even in all the details are available no efforts were made to verify the source of the cash deposited the assessee has proceduce all the records related to sales but the revenue without verifying that adding the purchase added the proceeds of the sales.

On this aspect of the matter he relied upon the decision cited in the written submission.

The brief facts related to the dispute are that the assessee having filed here return of income her case was came up for scrutiny assessment under CASS. Required statutory notices were issued and the assessee has filed business in gold jewellery in the name & style of her proprietorship concern M/s Alka Gems and also partner in M/s Raj Rattan Jewellers and Khandaka Sons Jewellers. For the year under consideration the assessee has declared total sales of Rs.80,54,292/- and declared net profit of Rs. 10,03,660/- and filed her ITR as per the provisions of section 44AD of the Act. In the assessment proceedings the ld. AO noted that the assessee has maintained bank account with United Bank of India, Jaipur bearing account No. 1666050004145 wherein she deposited a sum of Rs. 44,61,000/- during the period 9.11.2016 to 30.12.2016. When the assessee was asked about the source of the money so deposited into the bank account the assessee submitted that it is the proceeds of the sales and in support the assessee filed the copy of the cash book, purchase bills, sales bills copies of the value added tax return and those record were also attached in the paper book filed by the assessee.

Ld. AO examined the written submission and evidence filed by the assessee. While verifying the details filed by the assessee he noted certain discrepancies in respect of explanation of sources of cash deposits and other related aspects. Ld. AO asked the assessee to furnish copy of purchase/sale bills for the period 1.4.2016 to 8.11.2016. In response copies of bills. Those details were tabulated by the ld. AO vide page no 2 of this order. After examination of these details, summons u/s 131 were issued to the following concerns at the given addresses on 16.12.2019:- a) Shri Ram Babu Sambharia, Prop. M/s Parijat International b) Shri Puneesh Lodha, Prop. M/s Pragati Gems & Jewels c) Shri Kamlesh Sharma Prop. M/s K S Jewels A summons was issued to M/s Parijat International which was served by the Inspector of ld. AO. The other summons could not be served and returned back by the Inspector of the ld. AO with his remarks. During the assessment proceedings, the statement of Shri Ram Babu Sambharia Prop. M/s Parijat International was recorded on oath on 17.12.2019 wherein he contended that he was serving as a delivery man on some flower shop on monthly salary of Rs. 13,500/- and has never ever dealt in jewellery business. He stated to have never filed ITR. Thus, the only alleged credit purchase also proved bogus. From the said statement of Shri Rambabu Sambharia, ld. AO taken a inference that that he was not engaged in the any business activities and the proprietorship concerned namely Parijat Enterprises was opened and operated in his name by some other person and he is not aware of the transactions made in this concern. Thus, the 17.12.2019, notice u/s 133(6) was issued to Commercial tax department, Jaipur for providing details of VAT/Sales tax return for AY 2016-17 and KYC of following concerns: a) Shri Ram Babu Sambharia, Prop. M/s Parijat International b) Shri Puneesh Lodha, Prop. M/s Pragati Gems & Jewels c) Shri Kamlesh Sharma Prop. M/s K S Jewells In the case of M/s Parijat International (TIN No.08574052608), the CTO, Jaipur has submitted that "this firm is closed on 31.3.2013. So it has no assessment after 2013-14. In the case of M/s Pragati Gems & Jewels (TIN No.08152259212), the СТО, Jaipur has submitted only KYC form. He has not submitted any return. In the case of M/s K S Jewels (TIN No.0884212515), the CTO, Jaipur has submitted the following:

"the registration of the firm M/s K S Jewels Tin 08842212515 was cancelled on 1.7.2014. Due to cancellation, the firm was not assessed for the FY 2016-17. Also no VAT return was filed by the dealer for the FY 2016-17 as per the dealer profile report on official web portal."

After examination of details filed, a show cause notice was issued on 18.12.2019 for seeking explanation on 20.12.2019 on the above issues as placed on record by the Assessing Officer. Assessee has filed reply / explanation on 19.12.2019 at portal. The ld. AO noted that the written submission filed by the assessee has been taken into consideration, but the noted so ld. AO noted that assessee has tried to substantiate the cash deposit by way of bogus purchases / sales and mislead the revenue and thereby he rejected the contention of the assessee as per para 8.1 to. 8.7 of his order and thereby he by invoking the provision of section 68 of the Act added a sum of Rs. 44,61,000/- in the income of the assessee.

When the matter taken up before the ld. CIT(A), he supported the order of the ld. AO and preponderance of probabilities and thereby referring to the case laws about the reliability of evidence of purchases and thereby he justified the action of the ld. AO.

As is evident from the record that while verifying the source of cash deposit ld. AO asked for the details of the sales and purchases. The assessee supported the sales proceeding by placing the records such as cash book, bank books, stock record, purchase and sales bill and also filed the records of the his value added tax return wherein the sales made by the assessee recorded and thereby we note that there is no finding of the ld.

AO that the proceeds of the sales accounted by the assessee can be doubted. But in fact he doubted the purchases made by the assessee. Be that it may so he could have added the same under section 69C of the Act but preferred to add the proceeds of the sales u/s. 68 of the Act. The bench one party he confronted a person he said that he was not aware. But the ld. AO has not verified that in this case payment has been by an account payees and in two other cases no adverse finding recorded. Record reveals that while issuing notice u/s 133(6) to Commercial tax department, Jaipur details were called for the three parties and only persons statement was recorded. In the case of M/s Pragati Gems & Jewels (TIN No.08152259212), the СТО, Jaipur has submitted KYC form and no further action was taken and another case where the that party did not file the return on account of cancellation of their TIN number. So, it is not clear that parties were existing or not. Be that it may since the sales is not doubted by the ld. AO and turnover has already been accepted by the ld. AO and thereby the only issue is that whether the purchases made by the assessee are tainted as alleged. On the issue of tainted purchase, our Jurisdictional High Court in the case of Clarity Gold (P) Ltd. Vs. PCIT, CC-1, Jaipur [ 142 taxmann.com 421 ] held as under:

4. With reference to your observation with regards to submission of trading account for bogus transactions and real and genuine transactions we wish to reiterate as was submitted before the ADIT, Jaipur II; that you are kindly requested to first clarify to us as to what is meant by the term Bogus Bills, according to use a bill is a bill. 4.1 A business man during the course of his business purchase the goods locally or from foreign parties mainly on credit. All such parties are income tax assessee (PAN is allotted by the income tax Department) and Sales tax assessee (TIN is allotted by the Sales tax Department). As a businessman we are supposed to Alka Khandaka vs. ITO know the products we are buying, the terms for which the goods are sold and also do a reasonable check on the parties who are supplying the products. Our checks are based on PAN issued by the income tax department and TIN issued by the Sales tax Department. We do not have the infrastructure nor have the power to investigate the parties who are supplying us the goods. What else are we supposed to gather from the parties? That is not the intention of the income tax Act and if that were the case then how one will conduct the business? If you as an official of the income tax Department do not own upto the parties to whom you have issued PAN then it is not the fault of the businessmen. Entire issue of bogus bill being raised by you time and again as instilled fear in the minds of the businessmen and in turn it is leading to collapse of the trade in city of Jaipur. 4.2 Even the banker has to be satisfied when one opens a bank account, identity is obtained, complete particulars are obtained, all payments are by account payee cheques and this fact can be verified from both the banks by you. 4.3 The goods and the bills are procured from the registered sellers. All the goods purchased have been entered in the stock register maintained by the company. Entire payment towards the purchase of such goods have been made by way of an account payee cheque issued by the assessee to the concerned purchasers. The goods are subsequently sold as it is in the same shape, size and weight or after mixing it with other lots. Entire goods that are sold subsequent to purchase are supported by the sales bills issued to the customer and gods so sold are entered in the stock register maintained by the assessee appellant. Payments towards such sales have come from through proper banking channel in the account of the assessee. Profits from such sale have been duly disclosed in the books of accounts. All provisions of Sale of Goods Act have been accomplished in these transactions.

7. Thereafter, the CIT(A) has reproduced the finding recorded by the AO which we have already discussed.

8. He also taken us to the submissions made by the appellant before the CIT(A) in para no.5.2 which reads as under:— 5.2 The AR of the appellant has contended as under:— The additions made by the Learned Assessing officer in the trading account are assailed as under— Business of the assessee-The assessee is a company and engaged in the business of manufacturing and trading of gem stones. The company has separate main four units working at different locations in Jaipur besides other branches at Mumbai and other places in various parts of India. Separate books of accounts are maintained for these units. The four units working at Jaipur are named as Gem Unit, Silver Star Unit, Jewellery Division and Nazami Division. Complete books of accounts have been maintained during the course of business. The assessee is maintaining all the books of accounts including cash book, bank books journal book, Ledger bills & voucher along with their supporting as prescribed U/s 44AA of the Income Tax Act, 1961. The books of accounts are maintained on mercantile system of accounting. The books of accounts are audited u/s 44AB of the Income Tax Act, 1961 and audit report was submitted along with the return of income. The auditors have not made any adverse remarks regarding the maintenance of the books of accounts. During the course of assessment proceedings all these books was pointed out. In view of this the Learned Assessing Officer was not justified in rejecting the books accounts. BCTT survey results not provided to the assessee-

In the assessment order the Learned Assessing Officer has referred to surveys conducted by BCTT wing of the department in Financial Year 2007-08 it is mentioned in the assessment order that during the course of surveys it was gathered that assessee was obtaining bogus bills and Vijay Group and Lalwani Group. Before completing assessment the Assessing Officer has not provided either the results of surveys or the statement of Shri Anil Kumar Lalwani and Others so that assessee could furnish his defense. Hence when the material used by the Assessing Officer was not provided to be assessee, the assessment proceedings become bad in law. In turnover of bogus purchase and sales the margin is Nil—

In the entire assessment order the main thrust of the Learned

Assessing officer is on the issue of bogus voucher of purchase and sale. In this regard statements of Shri K.K. Ameria, Shri Raghu Dutt Tiwari and Shri Pawan Kumar Khandelwal have been quoted at length. The assessee has already challenged the veraity of these statements in as much as these were recorded under threat and duress. In any case the gist of the statements is that bills of purchases (bogus) were obtained after making payment of commission from 65 paise to rupee 1. (Page 22 of the assessment order where statement of Shri Raghu Dutt Tiwari is reproduced). Similarly the assessee also got a similar COMMISSION on issuing such bogus sale bills. In other words the assessee was not earning anything in the process of obtaining bogus purchase vouchers and issuing sale vouchers. The only benefit which the assessee derived was banking credit facility on the basis of increase turnover. This finds support from the statement of Shri K.K. Ameria relied upon by the Learned Assessing Officer. This is quoted in para 7 on page 2 of the assessment order. The assessee could increase his turnover in the process of alleged bogus purchase vouchers and bogus sale vouchers. Therefore the entire exercise of the Learned Assessing Officer which suggests that assessee earned in the aforesaid process of bogus vouchers. The Learned Assessing Officer has not conducted any post search inquiries which may also support the finding of the Learned Assessing Officer of earning higher profits by the assessee by way of obtaining bogus purchase vouchers and issuing bogus sale vouchers. Thus there was no justification of the Learned Assessing Officer for taking u/s 153 in the case and subsequently completing the assessment by making addition of Rs. 1,02,92,954/-. Sunjay Oil Case Industries v. CIT 10 DTR 153 (Guj.) case is not applicable— The Learned Assessing Officer has referred the aforesaid case law on page no.36 of the assessment order. It is submitted that the ratio of this case has not been found applicable in the case of the assessee in Assessment Year 2006-07 wherein addition was made by disallowing 25% of the bogus purchases to the tune of Rs. 5.40 crores. In the first appeal itself the Learned CIT(A) directed for applying GP rate of 8.5% as against 7.40% disclosed by the assessee. It is further submitted that as mentioned by the Learned Assessing Officer in the assessment order on page no.36 that in Assessment Year 2005-06 the issue of bogus purchases cropped up and the Learned Assessing Officer has applied GP rate of 13.2% as against GP rate of 12.72% disclosed by the assessee. This GP rate was subsequently reduced by the Learned CIT(A) to 13%. The Hon'ble ITAT later on sustained addition only of Rs. 1,00,000/- against a turnover of Rs. 14,26,09,000/- meaning thereby the GP rate was increased only 0.07%. In other words as against GP rate disclosed 12.72% GP rate applied was 12.79%. In view of the above facts the GP rate for the Assessment Year 2005- 06 virtually stood accepted by the Hon'ble ITAT despite rejection of books of accounts. In these circumstances no addition was warranted during the year under consideration also. History of the case is the best guidance- As discussed in the forgoing para in the Assessment Year 2005-06 the Hon'ble ITAT has accepted the GP rate of 12.79% in the case of the assessee as against disclosed GP rate of 12.72%. This means that despite rejection of accounts on the ground of bogus purchase bills only an addition of Rs. 1 Lac was sustained. The facts and circumstances of the case, the nature of business is same in the year under consideration and is identical to Assessment Year 2005-06. The GP rate is higher being 16.08%. Hence there was absolutely no justification for making any addition. Further the Learned CIT(A) has also accepted the GP rate of 8.5% in Assessment Year 2006-07 in the same set of circumstances. Considering these facts which constitute the history of the case no addition is called for in the year under consideration. No basis of application of GP rate of 17%- It is further submitted the entire facts for the Assessment Year 2005-06 and 2006-07 have been discussed by the Learned Assessing Officer in the body of the assessment order on page 36. In these assessment Year the GP rate accepted by the department is 12.79% in Assessment Year 2005-06 and 8.5% in Assessment Year 2006-07. Despite all this the Learned Assessing Officer has applied GP rate of 17% without bringing any additional material on record. No comparable case has been cited. In view of this the trading addition made by the Learned Assessing Officer deserves to be knocked down. The following table reflects the trading results of the assessee in Assessment Year 2006- 07 to 2010- 11. A.Y. Turnover Gross G.P. Remarks Profit Rate 2006-07 546642847 40452067 7.40% 8.5% applied by the Learned CIT(A) 2007-08 687479941 58148440 8.45% 2008-09 977758373 94661850 9.68% 2009-10 103062727 140129208 13.59% 1 2010-11 154038479 15893587 10.31%

The persual of the aforesaid table reveals that the result shown in Assessment Year 2010-11 is better in comparison to earlier years. The GP rate disclosed is Alka Khandaka vs. ITO better in comparison to that upheld by the ld. CIT(A) in A.Y. 2006-07 of 8.5%. No addition is Decision of ITAT in assesses's own case in assessment year 2005-06 to 200-10. The Hon'ble ITAT in to 249/JP/2013 has deleted the entire addition made under the similar facts and circumstances therefore the issue of the appeal is squarely covered in favour of the assessee.

9. He contended that tribunal has committed serious error in not appreciating the argument advanced by the appellant in para no.5.5 before the CIT(A) which reads as under:— 5.5 The appellant was again given a show cause u/s 251(2) of the IT Act, 1961 as to why not the income be enhanced by applying a GP rate of 15% (as upheld by Hon'ble ITAT in the recent cases) on stock deficiency of Rs. 15,03,42,985 after treating the same as unaccounted sales.

10. Counsel for the appellant has taken us to the observations made by the tribunal which according to the appellant are contrary to law.

3. Having perused the assessment order made by the AO, the order made by the CIT(A) and the Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under s. 256(1). It cannot be a matter of an argument Alka Khandaka vs. ITO that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold have been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether entire sum of undisclosed sale proceeds can be treated income of the relevant assessment year answers by itself in negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales.

Alka Khandaka vs. ITO Accordingly, the assessee shall be eligible for credit of disclosed turnover for the period starting 30.04.2009 and ending 20.5.2009 which comes to Rs 88,62,487 by evenly distributing the declared turnover over a period of 12 months. Accordingly, the undisclosed turnover in the hands of the assessee company comes to Rs 14,14,80,498 (Rs 15,03,42,985 less 88,62,487).

As is clear from the record that the ld. AO and the ld. CIT(A) doubted the purchases only and thereby being no doubt on the sales made by the assessee and thereby the following the ratio of the above binding precedent we hold that the assessee has already disclosed profit under presumptive taxation at 12.46 % and thereby we held that instead of that 12.46 % profit, the profit @ 15 % be estimated so as to cover up any price escalation on the issue of tainted purchase as trading addition reducing profit already disclosed. Based on these observations ground no. 1 & 2 raised by the assessee are allowed in part. Ground no. 3 being general and does not require our finding.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 16/10/2025.

Alka Khandaka vs. ITO Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 16/10/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Alka Khandaka, Jaipur izR;FkhZ@ The Respondent- ITO, Ward 1(2), Jaipur 2. vk;dj vk;qDr@ The ld CIT 3. 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 1014/JP/2025) 6. vkns'kkuqlkj@ By order,

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